From: FRANK CONGEMI [mailto:FRANK@frankcongemi.com] 

Sent: Tuesday, July 21, 2015 5:48 PM

To: EBSA, E-ORI - EBSA

Subject: RIN 1210-AB32, Conflicts of Interest Rule Proposal

July 21, 2015 

Office of Regulation and Interpretations

Employee benefits Security Administration

Attn: Conflicts of Interest Rule, Room N-5655 and e-ORI@dol.gov 

U.S. Department of Labor

200 Constitution Avenue, NW

Washington, DC 20210

Subject: RIN 1210-AB32, Conflicts of Interest Rule Proposal

Dear Ladies and Gentleman,

I. Small Investors Take Warning 

My Name is Frank Congemi and I have been registered as a financial advisor since 1986. I have 

been educating and delivering financial services as an independent advisor to individuals, 

families and businesses during this time. The initial investment amount to open an account with 

me is $250, which is accessible to anyone and still by far lower than any of the no load/low cost 

companies that DOL seems to favor.

Since all of the investments that I offer have beaten all the indexes at the cheapest cost quartile, I 

am alarmed that the US Department of Labor is recommending substandard and frankly 

negligent policies in relation to “small investors.” When the Department of Labor (“DOL”) 

begins framing what the retirement choices must be and recommending “low cost” and “index 

funds” and “a fiduciary standard” as the single model of delivering these services, the message 

loudly resonates as “government knows best.” 

II. The DOL Proposal Is Unsuitable for the Public. 

The proposition that investor underperformance necessitates a single class of financial advisory 

services under a fiduciary standard is an exercise of gross regulatory overreach that exceeds the 

scope of authority granted to the DOL.1[1] The Congress, in an exercise of fitting modesty in 

passing the Dodd-Frank Act did not legislate a unitary fiduciary standard. Instead, it asked the 

SEC, not the DOL, to study the matter carefully while at the same time specifying certain 

features of current commission business models that would not themselves be a violation of such 

 

1[1] See Stroock & Stroock & Lavan, DOL’s Fiduciary Re-Proposal: Caveat Venditor or “Death of a Salesman”?, 

May 18, 2015, Chart III on “Best Interest Contract” Class Exemption. 
a standard. Moreover, the approach is paternalistic and elitist to seek to impose a new legal 

regime on settled client relation-ships totaling many trillions of dollars. 

III. DOL Has a Flawed Understanding of the Marketplace 

and Draws the Wrong Conclusions.

Dalbar’s comment letter (June 5, 2015) on the pending proposal is significant for the insight that 

it affords on investor underperformance. It finds that 88% of the 20-year under-performance 

experienced by equity investors is attributable, not to bad investment advice or conflicts of 

interest, but to investor behaviors, specifically, panic selling, exuberant buying and market 

timing (43%) and withdrawal needs and lack of funds to invest (35%). These sobering statistics 

undermine the premise that investors will achieve better retirement investing if they were all 

limited to consulting fiduciaries. The client of the commissioned broker, Dalbar found, far from 

suffering retirement goal impairment, is more likely to start investing sooner, maintain a 

consistent investing practice and mitigate untimely withdrawals.

Let me just say that I completely support removing from the industry those advisers or 

salespersons who abuse clients and industry rules. Yet the vast majority (at least 90%) of 

independent financial advisors and their firms are legitimate and serve their clients remarkably 

well (17 trillion dollars in retirement assets alone). The enormous effort expended on twice 

proposing this conflicts of interest would have been better spent in bringing two or three cases 

directly focused on firms that were systematically abusing the trust and confidence of investors. 

And if those cases were not there in the marketplace, then why are we even considering a 

government mandated “solution” to a non-existent problem?

If unsuitable products, sales contests and excessive fees are ongoing problems at certain firms, 

have at them! I and my fellow brokers will cheer your efforts, as our reputations are sullied by a 

marketplace that fails to call out egregious behaviors. DOL’s work on the “Best Interest 

Contract” Exemption shows attention to several areas of misbehavior that are amenable to 

specific conduct rules. This is a far superior approach than seeking to re-engineer an entire 

marketplace into an imagined fiduciary promised land. 

Rather than overturn the broker-dealer service model, the DOL should, to the extent that there 

have been abuses in miss-sold retirement products, propound prophylactic anti-fraud rules, 

including barring unsuitable products or those imposing excessive fees. With a re-focused, 

harms-based approach, which is familiar to virtually every other sector of government market 

intervention, DOL will focus on fixing real issues instead of seeking a far-reaching proposal 

suppressing the commission-based service channel and likely further, unforeseen market 

impacts. 

IV. The Primary Regulator Should Have Primacy in Framing on 

Rulemaking

The Congress in Section 913 of the authorized the Securities and Exchange Commission to study 

and impose, if warranted, a uniform standard of conduct for broker-dealers and investment 
advisers when providing personalized investment advice about securities to retail customers. 

SEC Chairman Mary Jo White informed the Congress in testimony on March 24, 2015 that she 

believed that the SEC should undertake the careful study of the challenges required to frame a 

uniform fiduciary standard for advisers and brokers, asking the SEC staff to develop rulemaking 

recommendations for Commission. As the Chairman in her confirmation speech committed to 

“rigorous economic analysis” before putting rules in place to avoid “unnecessary burdens or 

competitive harm,” the Commission’s activity should displace the current, flawed proposal.

V. FINRA’s Experience Must be Utilized. 

Similarly, on May 1, 2015, Richard Ketchum, Chairman and CEO of the Financial Industry 

Regulatory Authority (“FINRA”), which regulates the broker-dealer channel serving retirementplanning clients, expressed his support for a uniform standard of conduct for broker-dealers and 

investment advisers.2[2] Importantly, he stated that the SEC, in consultation with FINRA, 

should develop and lead the proposal. Further, he observed that the DOL draft Best Interest 

Standard was inadequate and “doesn’t really describe a broker-dealer model that I’m aware of.” 

VI. Conclusion.

In summary, the imposition of the DOL’s unitary conduct standard across different client service 

models will harm investor choice and access to retirement counselors. I endorse the Dalbar 

conclusion that the DOL proposal is: “certain to cause massive confusion and needless changes 

while providing little or no discernible benefit. Forcing the inclusion of persons into a regulated 

class based on a complex definition of services provided is inef-fective.”

The opening of an IRA with an initial $1000 and a commitment to deposit $150 per month does 

not require a fiduciary. It is unwarranted regulatory overreach to require a homeowner to consult 

an architect or engineer when a contractor suffices. The DOL approach to re-make the range of 

retirement planning services in its conception is justified by neither market conditions nor the 

inadequacy of personal retirement assets. The DOL must abandon its unitary approach and 

adopt a consultive approach with the SEC, FINRA and other industry participants. 

I would welcome and hereby request the opportunity to share my views, informed as they are by 

my long engagement with the investors I serve, regarding this ill-advised policy at the next 

public hearing. I would like to offer some semblance of balance to the top-down view that seems 

to drive the re-proposed Rule, as, up till now, it has been one-sided and filled with many factual 

inaccuracies by those who neither hold securities licenses nor have any idea how the securities 

business functions.

Thank you for your consideration.

Frank Congemi

 

2[2] http://www.corporatedefensedisputes.com/2015/05/finra-chairman-sec-should-lead-on-uniform-fiduciarystandard/
Frank Congemi

Email: frank@frankcongemi.com

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